Gustav Causes Little Damage to US Refiners

Reuters

Tuesday, 2 Sep 2008 | 3:16 AM ETReuters

SHARES

Several major U.S. refiners said early checks on Monday showed their facilities were unharmed by Hurricane Gustav, but at least two others were said to be considering dipping into the U.S. Strategic Petroleum Reserve to keep operations going after the storm shut down key waterways.

Gustav weakened to Category 2 before roaring ashore near Port Fourchon, Louisiana, on Monday, potentially sparing the the kind of damage that the region's platforms, rigs and refineries suffered at the hands of more powerful Katrina three years ago.

Weathering Gustav

Insight on how the Gulf Coast refineries have fared in the aftermath of Gustav, with Bill Day, Valero VP, corp communications

Offshore operators said remote sensors indicated that major platforms remained where they were moored before the storm, although Shell, the region's largest producer, said it may take three to five days to restore production.

Assessing damage to refineries. Watch video at left.

Energy companies had to shut in all 1.3 million barrels of U.S. offshore oil production -- a quarter of U.S. output -- as well as 7.06 billion cubic feet per day in natural gas supply, or nearly all of the 15 percent of national production the Gulf provides, as Gustav ploughed through the region.

By late Monday night, Gustav had subsided to a tropical storm, with winds of 60 miles per hour (96.5 kph), as it moved inland across Louisiana.

U.S. crude stood at $111.07 a barrel by 0415 GMT, about 33 cents below trading levels late on Monday, when prices slumped $4 on easing concerns about Gustav, which had been called the biggest threat to the sector since 2005's devastation.

Thirteen refineries with a combined capacity of 2.67 million barrels per day (bpd) -- 15 percent of the country's total -- were shut by late Monday, but early signs suggested many had been spared.

Valero Energy said an initial check of its 250,000 barrels per day (bpd) refinery at St Charles, Louisiana, refinery showed no significant structural damage from Gustav, and that the plant had electrical power.

ConocoPhillips said remote sensors showed that its Magnolia platform in the Gulf of Mexico had suffered no damage from the hurricane. Elsewhere, police said no flooding had been seen at the Exxon Mobil Chalmette, Murphy Meraux and ConocoPhillips Alliance refineries south and east of New Orleans.

The second-largest U.S. refinery, Exxon Mobil's 503,000-bpd Baton Rouge plant was suddenly and temporarily turned off in an electrical power failure caused by high winds.

Supply Problems

Ten refineries with a combined capacity of 3.23 million barrels were at reduced output as ship channels from Florida to Houston were shut, cutting off their supply of crude. The Louisiana Offshore Oil Port, the only U.S. port capable of offloading the biggest oil tankers, also halted all operations due to high winds and waves.

Chevron said production was cut at its 330,000 barrel-per-day (bpd) refinery in Pascagoula, Mississippi, due to the closure of the ship channel, but expected output to resume as soon as the channel opens. The channel was expected to reopen once weather from Hurricane Gustav clears.

An Exxon spokeswoman said she could not confirm Jindal's statement. A U.S. Energy Department official said no requests had yet been made to uncork some of the 700 million barrels of crude the U.S. has on hand for a supply interruption.

The offshore fleet of production platforms and drilling rigs may have fared as well as the refineries, with Conoco and Anadarko saying remote sensors indicated the giant and costly structures had not been dragged far away or crushed.

Shell said it was planning to begin returning crews to platforms outside of Gustav's path, while doing flyovers of those that bore hurricane's fury.